Draft legislation released for unfair contract terms among SMEs

27th May 2015

One of the biggest risks to a small business's cash flow is the challenge posed by unfair contract terms that make it harder for a company to manage its finances. To better address this issue, the government has recently released draft legislation, extending the protection to SMEs.

Currently, only individuals have protection from unfair contract terms under the law. Over the last few months, plans have been in place to extend this protection to small businesses as well, with this draft legislation the latest step in this process.

The consultation period ended on May 12, with the Treasury now holding targeted meetings with the small business sector. A period of consultation also occurred last year where relevant parties had the opportunity to provide feedback on these developments.

This isn't the only major announcement recently to target SMEs, with the Federal Budget also announcing a number of major changes for small businesses, including moves to lower compliance costs.

With so many new initiatives in the works, it is likely to be much easier in the future to manage a small business. By also implementing internal measures like effective accounting software, businesses will be well-placed to realise future growth opportunities.

In a statement, Small Business Minister Bruce Billson explained how these new changes to contract terms would affect businesses moving forward.

"Under the new protections, a court will be able to strike out a term of a small business contract that is considered unfair. For example, a term that allows a big business to unilaterally change the price or key terms during the course of the contract could be considered unfair," stated Mr Billson.

"The protections will apply to businesses that employ less than 20 persons for transactions under $100,000, or $250,000 for contracts that last longer than 12 months."